A study submitted by CFA Romania estimates that Romania’s public debt in 2022 will reach 52.5% in 2022. It is for the first time in the last 60-65 years when the country’s public debt reaches such a high level. Romania’s position in this regard is better than that of several CEE states, especially to Hungary, Croatia, Hungary, Slovenia with a public debt of over 75% of GDP, but also to Poland and Slovakia which exceeded at the end of Q3 2021 over 50% of GDP.
At the end of the third quarter of 2021, Romania’s public debt was estimated by Eurostat at about 47% of GDP, almost 5 pp higher than five years ago. Compared to the 90% level, which was the EU average, our country’s public debt to GDP is relatively modest. The highest ratios of government debt to GDP at the end of the third quarter of 2021 were recorded in Greece (200.7%), Italy (155.3%), Portugal (130.5%), Spain (121.8%), France (116.0%), Belgium (111.4%) and Cyprus (109.6%).
The accelerated growth of public debt was determined by the conjuncture of the pandemic crisis, the wave of non-resonant spending on production and investment, as well as external loans at very high-interest rates.
Eurostat highlights the situation in the European Union. At the end of the third quarter of 2021, the government debt to GDP ratio in the euro area stood at 97.7%, compared with 98.3% at the end of the second quarter of 2021. In the EU, the ratio also decreased from 90.9% to 90.1%. Both for the euro area and EU, the decrease in government debt to GDP ratio at the end of the third quarter was due to an increase in GDP, while debt continued to increase due to the financing needs of the policy measures adopted to mitigate the economic and social impact of the coronavirus pandemic. Compared with the third quarter of 2020, the government debt to GDP ratio rose in both the euro area (from 96.6% to 97.7%) and the EU (from 89.2% to 90.1%).
At the end of the third quarter of 2021, debt securities accounted for 82.7% of euro area and for 82.4% of EU general government debt. Loans made up 14.2% and 14.6% respectively and currency and deposits represented 3.1% of euro area and 3.0% of EU government debt. Due to the involvement of EU Member States’ governments in financial assistance to certain Member States, quarterly data on intergovernmental lending (IGL) are also ublished. The share of IGL as a percentage of GDP at the end of the third quarter of 2021 accounted for 1.9% in the euro area and to 1.6% in the EU.
Compared with the second quarter of 2021, seven Member States registered an increase in their debt to GDP ratio at the end of the third quarter of 2021 and twenty a decrease. The largest increases in the ratio were observed in Hungary (+2.9 percentage points – pp), France (+1.5 pp) and Romania (+1.1 pp), while the largest decreases were recorded in Greece (-6.6 pp), Portugal (- 4.9 pp), Croatia (-3.7 pp), Cyprus and Belgium (both -2.3 pp), Czechia (-2.2 pp), and Austria (-2.1 pp).
Compared with the third quarter of 2020, fifteen Member States registered an increase in their debt to GDP ratio at the end of the third quarter of 2021 and twelve Member States a decrease. The largest increases in the ratio were recorded in Spain (+7.8 pp), Hungary (+6.5 pp), Malta (+5.7 pp), Austria (+5.6 pp) and Romania (+5.5 pp), while the largest decreases were observed in Cyprus (-6.4 pp), Ireland (-3.6 pp), the Netherlands (-2.5 pp), Denmark (-2.4 pp), Croatia (-2.3 pp) and Sweden (-2.2 pp).
CFA Romania analysts estimate a budget deficit of 7% of GDP in 2021 and 5.7% in 2022, an inflation rate of 6.06% for the 12-month horizon. The economic impact of coronavirus is expected to last at least until the second quarter of 2023.